Ipsidy Announces Annual Results for 2016 and Business Strategy Update

LONG BEACH, New York, July 12, 2017 /PRNewswire/ -- Ipsidy Inc. (www.ipsidy.com) (OTC: IDGS), (formerly known as ID Global Solutions Corporation), a provider of secure, biometric identification, identity management and electronic transaction processing services, today announced its results for the year ended December 31, 2016 and provided a business strategy update.

In a world that is increasingly digital and mobile, but also fraught with account breaches and stolen identity information, our vision is to offer solutions that provide pre-transaction verification of identity as well as embed identity verification within every electronic transaction message processed through our platform, or other electronic systems. We believe that it is essential that businesses and consumers know who is on the other side of an electronic transaction and have an audit trail, proving that the identity of the other party was duly verified. Ipsidy is therefore developing solutions intended to provide our customers with the next level of transaction security, control and certainty operating in both physical environments leveraging mobile eco-systems.

We are building upon our existing capabilities in biometric identification and multi-factor identity management solutions to develop an identity transaction platform for our customers. The platform enables mobile users to more easily authenticate their identity to a mobile phone or portable device of their choosing (as opposed to other identity solutions requiring dedicated hardware). Our system allows participants to complete transactions with a digitally signed authentication response, including the underlying transaction data and embedded attributes of the participant's identity, accessible to the business.

Our strategy is to leverage our identity transaction platform to support a variety of vertical markets. These vertical markets include but are not limited to border security, public safety, public transportation, enterprise security, electronic payments transactions and banking. In addition, our platform is designed to be highly available and language agnostic thereby accessible to customers around the world. We believe that the various technologies that Ipsidy is developing and has acquired can be combined into a unified offering.

Ipsidy's digital mobile wallet application, or electronic account holder, will contain different services and accounts that enable users to conveniently and securely authenticate and authorize a variety of electronic transactions, using their identity. For example, our closed-loop payment account and digital issuance platform is intended to offer secure and cost-effective methods of conversion of cash and paper to electronic payments. Consumers accessing this system, using their mobile phones, electronic devices, or smart card payment tokens will be able to participate in the digital economy thereby facilitating financial inclusion for the un-banked and under banked population around the globe. Another example is for consumers and employees to use their mobile application to verify identity, in order to access secure digital, or physical environments.

"In an increasingly digital and connected world compromised passwords, security breaches and stolen identities, represent one of the biggest dangers to everybody globally," said Philip Beck, Chairman and Chief Executive Officer of Ipsidy "Our mission is to enable people to authenticate their identity to their own device, before commencing a transaction. We are facilitating the processing of diverse electronic transactions, be they payments, votes, or physical or digital access, embedded with the participant's identity."

Financial Highlights for the Year Ended December 31, 2016

Total revenue for the year was $1.9 million, compared to $0.7 million for 2015.

Net loss for the year was $9.9 million, compared to $36.7 million for 2015.

Basic and diluted net loss per share for the year was $0.05 cents, compared to $0.21 cents for 2015.

Adjusted EBITDA loss for the year was $4.3 million, compared to $2.4 million in 2015, as the Company invested in people, infrastructure and technology to support future operations.

Refer to Table 1 for reconciliation of net income to Adjusted EBITDA (a non-GAAP measure).

Subsequent Events

Subsequent to the end of 2016:

Announced the appointment of Philip Beck as Chairman of the Board of Directors, Chief Executive and President on January 31, 2017 and the appointment of Stuart Stoller as Chief Financial Officer on January 31, 2017.

Converted outstanding debt and accrued interest in the amount of approximately $6.3 million into approximately 84.8 million shares of common stock.

Repaid an additional $0.3 million of outstanding debt, canceled 3.6 million warrants and cancelled 2.5 million shares of the Company's common stock.

Secured $7.0 million of additional debt and equity financing.

The combination of the above events has helped clean up the Company's balance sheet and provided near-term working capital requirements.

Operational Highlights

Acquired FIN Holdings Inc. with its businesses of cutting-edge biometric fingerprint software technology and algorithms, as well as secure credential products and government customers in the United States and Africa.

Continued process improvements to the Company's MultiPay bill pay transaction platform in Colombia.

Continued development of the Ipsidy identity transaction platform

Acquired and continued development of a digital processing platform comprising modules for payment card issuance, HCE, tokenization, and a consumer mobile wallet as well as a merchant acquiring gateway and mobile point of sale, and mobile-commerce, beacon marketing and loyalty products all designed to facilitate to new business models.

Signed agreement for the provision of automated fare collection kiosks for the City of Bogota Transit Authority and installed the first 80 kiosks under the previous pilot agreement.

Management Changes

After the year end, the Company reorganized its Board of Directors and senior management, in particular appointing Philip Beck as Chairman and CEO and Stuart Stoller as CFO. Philip founded and was CEO and Chairman of Planet Payment, Inc., a provider of international payment and transaction processing services, in more than 23 countries. Stuart, a CPA previously served as a Senior Vice President of both The New York Times Company and Macy's, Inc. Mr. Stoller began his career as an auditor in the Deloitte New York audit practice. The Company also hired senior technical and operational executives to oversee the Company's operations.

Additional analysis of the Company's performance can be found in "Management's Discussion and Analysis of Financial Condition and Results of Operations" included in the Annual Report on Form 10-K for the Fiscal Year ended December 31, 2016 to be filed at www.sec.gov and posted on the Company's investor relations website.

About Ipsidy:

Ipsidy is a provider of secure, biometric identification, identity management and electronic transaction processing services. Ipsidy is headquartered in New York and has operating subsidiaries: MultiPay in Colombiawww.multipay.com.co and Cards Plus in South Africa. www.cardsplus.co.za. In a world that is increasingly digital and mobile, our vision is to enable solutions that provide pre-transaction verification of identity as well as embed identity verification within every electronic transaction message processed through our platform, or other electronic systems. We believe that it is essential that businesses and consumers know who is on the other side of an electronic transaction and have an audit trail, proving that the identity of the other party was duly verified. We are therefore developing solutions intended to provide our customers with the next level of transaction security, control and certainty. Further information on Ipsidy can be found at www.ipsidy.com or contact us at sales@ipsidy.com.

Information contained in this announcement may include "forward-looking statements." All statements other than statements of historical facts included herein, including, without limitation, those regarding the financial position, business strategy, plans and objectives of management for future operations of both Ipsidy and its business partners, net revenue, net income, Adjusted EBITDA, diluted earnings per share, future service launches with customers and new initiatives and customer pipeline are forward-looking statements. Such forward-looking statements are based on a number of assumptions regarding Ipsidy present and future business strategies, and the environment in which Ipsidy expects to operate in the future, which assumptions may or may not be fulfilled in practice. Implementation of some or all of the new services referred to is subject to regulatory or other third party approvals. Actual results may vary materially from the results anticipated by these forward-looking statements as a result of a variety of risk factors, including the risk that implementation, adoption and offering of the service by customers, consumers and others may take longer than anticipated, or may not occur at all; changes in laws, regulations and practices; changes in domestic and international economic and political conditions and others. Additional risks may arise with respect to commencing operations in new countries and regions, of which Ipsidy is not fully aware at this time. See the Company's Annual Report Form 10-K for the Fiscal Year ended December 31, 2016 to be filed at www.sec.gov for other risk factors which investors should consider. These forward-looking statements speak only as to the date of this announcement and cannot be relied upon as a guide to future performance. Ipsidy expressly disclaims any obligation or undertaking to disseminate any updates or revisions to any forward-looking statements contained in this announcement to reflect any changes in its expectations with regard thereto or any change in events, conditions or circumstances on which any statement is based.

Non-GAAP Financial Information.

The Company provides certain non-GAAP financial measures in this statement. Management believes that Adjusted EBITDA, when viewed with our results under GAAP and the accompanying reconciliations, provides useful information about our period-over-period results. Adjusted EBITDA is presented because management believes it provides additional information with respect to the performance of our fundamental business activities and is also frequently used by securities analysts, investors and other interested parties in the evaluation of comparable companies. We also rely on Adjusted EBITDA as a primary measure to review and assess the operating performance of our company and our management team in connection with our executive compensation. These non-GAAP key business indicators, which include Adjusted EBITDA, should not be considered replacements for and should be read in conjunction with the GAAP financial measures.

We define Adjusted EBITDA as GAAP net loss adjusted to exclude: (1) interest expense, (2) interest income, (3) provision for income taxes, (4) depreciation and amortization, (5) stock-based compensation expense (5) derivative income (expense) and (6) certain other items management believes affect the comparability of operating results. Please see "Adjusted EBITDA" below for more information and for a reconciliation of Adjusted EBITDA to net income, the most directly comparable financial measure calculated and presented in accordance with GAAP.

Table 1

Reconciliation of Net Loss to Adjusted EBITDA

Year Ended December 31,

2016

2015

Net Loss

$ (9,851,403)

$ (36,679,169)

Interest Expense

3,625,984

1,136,528

Gain (loss) on derivative liability

(7,345,000)

26,647,021

Depreciation and amortization

421,494

147,052

Taxes

2,946

-

Write-off of asset

225,862

200,000

Stock compensation

8,648,212

6,320,114

Adjusted EBITDA

$ (4,271,905)

$ (2,428,454)

IPSIDY INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

December 31,

December 31,

2016

2015

ASSETS

Current Assets:

Cash

$ 689,105

$ 349,873

Accounts receivable, net

138,359

509,027

Current portion of net investment in direct financing lease

44,990

-

Inventory

150,679

516,663

Other current assets

166,479

134,224

Total current assets

1,189,612

1,509,787

Property and Equipment, net

115,682

37,775

Other Assets

358,343

319,592

Intangible Assets, net

3,474,291

1,436,534

Goodwill

6,736,043

166,689

Net investment in direct financing lease, net of current portion

674,015

-

Total assets

$ 12,547,986

$ 3,470,377

LIABILITIES AND STOCKHOLDERS' DEFICIT

Current Liabilities:

Accounts payable and accrued expenses

$ 1,687,900

$ 717,500

Convertible notes payable, net

250,000

383,346

Derivative liability

8,388,355

25,445,645

Contingent purchase consideration

-

370,125

Notes payable, net

109,819

634,069

Deferred revenue

398,680

-

Total current liabilities

10,834,754

27,550,685

Long-term Liabilities:

Convertible notes payable, net, less current maturities

2,245,596

-

Notes payable, net, less current maturities

3,051,603

-

Derivative liability, net of current portion

9,668,276

-

Total long-term liabilities

14,965,475

-

Total liabilities

25,800,229

27,550,685

Commitments and Contingencies

Stockholders' Deficit:

Common stock $0.0001 par value:

500,000,000 shares authorized; 234,704,655

and 187,854,139 shares issued and outstanding

as of December 31, 2016 and 2015, respectively

23,470

18,785

Additional paid in capital

35,341,669

14,923,936

Accumulated deficit

(48,925,993)

(39,074,590)

Accumulated comprehensive income

308,611

51,561

Total stockholders' deficit

(13,252,243)

(24,080,308)

Total liabilities and stockholders' deficit

$ 12,547,986

$ 3,470,377

IPSIDY INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

Year Ended

December 31,

December 31,

2016

2015

Revenues:

Products and services

$ 1,877,446

$ 235,364

Product and services, related party

500,000

Lease income

52,492

-

Total revenues, net

1,929,938

735,364

Operating Expenses:

Cost of Sales

492,237

-

General and administrative

14,243,363

9,003,143

Research and development

340,317

480,789

Depreciation and amortization

421,494

147,052

Total operating expenses

15,497,411

9,630,984

Loss from operations

(13,567,473)

(8,895,620)

Other Income (Expense):

Gain (loss) on derivative liability

7,345,000

(26,647,021)

Interest expense

(3,625,984)

(1,136,528)

Other income (expense), net

3,719,016

(27,783,549)

Loss before income taxes

(9,848,457)

(36,679,169)

Income Taxes

2,946

-

Net loss

$ (9,851,403)

$ (36,679,169)

Net Loss Per Share - Basic and Diluted

$ (0.05)

$ (0.21)

Weighted Average Shares Outstanding - Basic and Diluted

217,570,666

175,696,214

IPSIDY INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

Year Ended

December 31,

December 31,

2016

2015

CASH FLOWS FROM OPERATING ACTIVITIES:

Net loss

$ (9,851,403)

$ (36,679,169)

Adjustments to reconcile net loss with cash used in operations:

Depreciation and amortization expense

421,494

147,052

Gain on sale of property and equipment

(3,681)

-

Stock-based compensation

8,648,212

6,320,114

Common stock issued for services

311,103

557,750

Amortization of debt discount

2,480,662

832,775

Amortization of debt issuance costs

684,417

154,447

(Gain) loss on derivative liability

(7,345,000)

26,647,021

Write-off of assets

225,862

200,000

Loss on investment

-

72,000

Changes in operating assets and liabilities:

Accounts receivable

682,535

(448,355)

Lease receivable

28,939

Other current assets

(32,255)

(62,442)

Inventory

(190,471)

(433,598)

Accounts payable and accrued expenses

(248,068)

229,677

Deferred revenue

398,680

-

Net cash flows from operating activities

(3,788,974)

(2,462,728)

CASH FLOWS FROM INVESTING ACTIVITIES:

Purchase of property and equipment

(23,565)

(16,265)

Proceeds from sale of property and equipment

8,007

-

Payment of patent costs

(19,200)

(37,621)

Work-in process

(264,613)

(133,117)

Cash acquired in acquisitions

419,042

-

Net cash flows from investing activities

119,671

(187,003)

CASH FLOWS FROM FINANCING ACTIVITIES:

Proceeds from issuance of notes payable and common stock, net

1,550,000

1,040,000

Proceeds from issuance of notes payable and warrants

1,375,000

2,200,000

Proceeds from issuance of notes payable, related parties

13,609

202,000

Debt issuance costs paid

(229,423)

(296,400)

Proceeds from sale of common stock

1,250,000

-

Payment of equity issuance costs

(120,242)

-

Advances from related parties

-

(60,200)

Principal payments on notes payable to related parties

-

(91,322)

Principal payments on notes payable

(87,459)

(205,331)

Net cash flows from financing activities

3,751,485

2,788,747

Effect of foreign currencies

257,050

51,561

Net Change in Cash

339,232

190,577

Cash, Beginning of the Year

349,873

159,296

Cash, End of the Year

$ 689,105

$ 349,873

Supplemental Disclosure of Cash Flow Information:

Cash paid for interest

$ -

$ 199,967

Cash paid for income taxes

$ -

$ -

Non-cash Investing and Financing Activities:

Issuance of common stock for conversion of notes payable and accrued interest

$ 21,222

$ 181,205

Issuance of common stock in settlement of contingent liability

$ 59,681

$ -

Issuance of common stock with debt

$ 222,815

$ -

Issuance of common stock for debt issuance costs

$ 257,696

$ 298,400

Issuance of warrants for inventory

$ 79,081

$ -

Debt discount for fair value of warrants issued in connection with debt

$ 358,411

$ 1,062,704

Debt discount for fair value of embedded conversion feature

$ 290,425

$ 42,275

Reclassification of derivative liabilities upon conversion of convertible debt into common stock

$ 692,850

$ 2,706,167

Reclassification of inventory to net investment in direct financing lease